01/22/2013 10:28 am ET Updated Mar 24, 2013

New Mexico Health Care Dispute Puts Obamacare In The Crosshairs

Being one of just four Republican governors to embrace a central pillar of President Barack Obama's health care reform law wasn't enough to insulate New Mexico Gov. Susana Martinez from Democratic resistance.

Martinez wants New Mexico to establish and operate a state-run health insurance exchange under Obamacare (she also backs the law's Medicaid expansion), which is mostly a Democratic priority. But the Associated Press reports Democrats, who control the legislature in the Land of Enchantment, are objecting to Martinez moving ahead on her own, despite the fact that she received conditional approval from the Obama administration earlier this month.

Under the governor's plan, an existing entity called the New Mexico Health Insurance Alliance would take charge of the health insurance exchange. But Democratic lawmakers contend new legislation is required to authorize the exchange. And they've found a supporter in Attorney General Gary King, a fellow Democrat, who says the alliance doesn't comply with the federal health care reform law, according to an Associated Press report published Monday.

The alliance's board, mostly appointed by the governor, is made up of insurance company officials, small employers and workers, but King's office said state law doesn't prohibit the insurance industry from having majority control of the board -- a prohibition required under federal law. There also are conflicts between state and federal laws over which small employers could be eligible to obtain health insurance coverage and whether insurance companies could deny coverage because of a worker's preexisting health condition.

King's office concluded that the state law governing the alliance "does not contain the necessary legal authority to establish a New Mexico exchange that comports with federal law."

Martinez's office says opening up this can of worms could make it impossible for New Mexico to set up its exchange in time for people to start using it on Oct. 1, meaning the federal government would have to step in like it will in 25 other states that refused to establish health insurance exchanges. Complicating Martinez's position is that the legislature passed health insurance exchange bill in 2011 but she vetoed it.